Former pensions minister: Lifetime ISAs are dangerous

Baroness Altmann is worried the government will turn pensions into ISAs

General Election 2015 campaign - April 17th

Baroness Altmann has warned that the Lifetime ISA sets a dangerous precedent, and says it should be scrapped before it is allowed to do any damage. It's the latest announcement from the ousted pensions minister, who has made it clear she was sick of sensible reform taking a back seat to political considerations - and has been letting fly in the press.

The Lifetime ISA was announced in March. It will allow savers under the age of 40 to save up to £4,000 a year - and get a 25% government bonus. The money could be used to buy a first property, or kept until the age of 60 and used to fund retirement.

Altman is concerned that it forces people to take the wrong approach to saving for retirement. She told Money Marketing magazine: "I would love to see the Lifetime ISA scrapped. The Lifetime ISA is by definition not going to last a lifetime because it's an ISA, and because you can get the tax-free money too soon. A pension is meant to provide money lasting into your eighties." She said that if people need help saving for a property, then the government should have launched an ISA for that - rather than lumping pensions in with it.

Unfortunately, she says, Lifetime ISAs are unlikely to be given the push. She also told Citywire that she was concerned that this step in the wrong direction could leave the door open to replacing pensions with ISAs altogether. She said: "I am not convinced the desire in the Treasury to make pensions into ISAs has gone away."

Unimpressed

It's not the first time Altmann has spoken out since leaving office. She immediately wrote to Theresa May (and circulated the letter to journalists), calling for more to be done to support women who had been affected by increases in the state pension age. She pointed out "they were not adequately informed," and said the hardship they were facing needed to be addressed. She also called for a reform in social care, and a new 'one nation' pension.

Today Altmann has also published a new blog outlining why she's concerned about what will happen to pensions now she is out of government. She noted that the role of Pensions Minister had been downgraded in the reshuffle, and warned: "It could be that this poses threats to future pensions and we must be alert to the dangers. Pensions are vital for the long-term future of millions of people in our country. We are in the middle of a major programme of reform and it needs to be guided carefully, otherwise there are dangers that pensions policy could be derailed."

She highlighted that the Pensions Bill could be at risk. It contains measures to protect members of trust-based defined contribution pension schemes (who currently can lose their pensions if the trust winds up), and introduces a cap on exit charges. She warned that auto-enrolment could be derailed - and the programme of increasing contributions delayed, and that her work on protections for defined benefit schemes could be at risk.

When Baroness Altmann was named as Pensions Minister, she was universally welcomed by experts, who said it would be great to have someone who knew what they were doing at the top, driving sensible reform. It would therefore seem particularly worrying that while she was in government she was constantly overruled by those with less expertise and experience, and that now she has left, she is convinced that what she has managed to achieve will be quickly undone.


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